Bankrupt AIG Might Have Been Better Than Bailout

Experts say letting insurer file bankruptcy would have been a better, cheaper, plan

By Jim O'Neill, Newser Staff

Posted Nov 3, 2008 6:33 AM CST

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Bankrupt AIG Might Have Been Better Than Bailout — Former CEO of AIG Martin Sullivan testifies before the House Oversight and Government Reform Committee on Capitol Hill in Washington, Tuesday, Oct. 7, 2008. (AP Photo/Lawrence Jackson)

The government’s $143 billion bailout of AIG is looking more and more like an expensive example of good money following bad, as financial experts are concluding that bankruptcy would have been better for both the insurance giant and taxpayers, reports the Washington Post. AIG has burned through more than $90 billion in government funds, but AIG’s mortgage holdings continue to deteriorate—along with the value of its related holdings.

Taxpayers, who now own 80% of the company as a result of the bailout, are seeing their investment decimated. Critics say a bankruptcy would have offered more structure and protection from market volatility than the hastily negotiated deal that hoped to keep the company—and the economy—solvent.
(More financial crisis stories.)

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